0001558370-23-013049.txt : 20230803 0001558370-23-013049.hdr.sgml : 20230803 20230803070110 ACCESSION NUMBER: 0001558370-23-013049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 75 CONFORMED PERIOD OF REPORT: 20230630 FILED AS OF DATE: 20230803 DATE AS OF CHANGE: 20230803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Elevation Oncology, Inc. CENTRAL INDEX KEY: 0001783032 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 841771427 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40523 FILM NUMBER: 231137995 BUSINESS ADDRESS: STREET 1: 101 FEDERAL STREET STREET 2: SUITE 1900 CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6463459464 MAIL ADDRESS: STREET 1: 101 FEDERAL STREET STREET 2: SUITE 1900 CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: 14ner Oncology, Inc. DATE OF NAME CHANGE: 20190719 10-Q 1 elev-20230630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-40523

Elevation Oncology, Inc.

(Exact name of registrant as specified in its charter)

Delaware

84-1771427

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

101 Federal Street, Suite 1900

Boston, Massachusetts 02110

(Address of principal executive offices)

(716) 371-1125

(Registrant’s telephone number)

888 Seventh Ave., 12th Floor

New York, New York 10106

(Former address of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No  

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading symbol

Name of Exchange on which registered

Common stock, par value $0.0001 per share

ELEV

The Nasdaq Stock Market LLC

As of July 28, 2023, there were 42,381,952 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

    

    

Page

                 

Part I

Financial Information

5

Item 1.

Condensed Consolidated Financial Statements (unaudited)

5

Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022

5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)

6

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)

9

Notes to Condensed Consolidated Financial Statements (unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

37

Part II

Other Information

39

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

98

Item 3.

Defaults Upon Senior Securities

98

Item 4.

Mine Safety Disclosures

98

Item 5.

Other Information

99

Item 6.

Exhibits

99

Exhibit Index

99

Signatures

101

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “predict,” “potential” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. We intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk factors” and elsewhere in this filing. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The forward-looking statements in this Quarterly Report include, among other things, statements about:

our ability to develop, obtain regulatory approval and commercialize EO-3021 and our other product candidates;
the timing of our preclinical studies and clinical trials for EO-3021 and our other product candidates;
our ability to establish and maintain collaborations, including with CSPC Pharmaceutical Group Limited (collectively with its affiliates, “CSPC”), our licensor and partner for EO-3021;
estimates of our addressable market and market growth;
our expectations regarding demand for, and market acceptance of, EO-3021 and our other product candidates;
our ability to compete effectively with existing competitors and new market entrants;
the potential effects of extensive government regulations relating to our industry;
our ability, and our licensors’ ability, to obtain, maintain, and protect and enforce intellectual property and proprietary rights;
our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;
our ability to maintain secure, efficient and uninterrupted operation of our information technology systems from security breaches, cyberattacks, loss or leakage of data and other disruptions;
our ability to expand our pipeline of product candidates;
our ability to attract and retain key management and technical personnel;
general economic, market and geopolitical conditions, including rising interest rates, market volatility and inflation, and the impact of geopolitical tensions with China and the war in Ukraine;
the effects of the continued presence of COVID-19 on any of the above or any other aspect of our business operations; and
our expectations regarding expenses, future revenue, capital requirements, and our needs for additional financing.

3

The forward-looking statements made in this filing relate only to events or information as of the date on which the statements are made in this Quarterly Report. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations, except as required by law. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

4

PART I —FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

June 30, 

December 31, 

    

2023

    

2022

    

(unaudited)

(Note 2)

Assets

    

  

    

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

106,325

$

45,917

Marketable securities, available for sale

1,598

44,363

Prepaid expenses and other current assets

 

1,502

 

2,697

Total current assets

 

109,425

 

92,977

Property and equipment, net

 

78

 

98

Other non-current assets

 

867

 

1,086

Total assets

$

110,370

$

94,161

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

5,241

$

6,362

Accrued expenses

 

3,176

 

9,330

Total current liabilities

 

8,417

 

15,692

Non-current liabilities:

 

  

 

  

Long-term debt, net of discount

29,772

29,435

Restricted stock repurchase liability

 

 

2

Total liabilities

 

38,189

 

45,129

Commitments and contingencies (see Note 12)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares issued or outstanding as of June 30, 2023 and December 31, 2022, respectively

Common stock, $0.0001 par value; 500,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 42,420,139 and 23,345,115 shares issued as of June 30, 2023 and December 31, 2022, respectively; 42,381,952 and 23,312,529 shares outstanding as of June 30, 2023 and December 31, 2022, respectively

 

4

 

2

Additional paid-in capital

 

249,668

 

199,492

Accumulated other comprehensive loss

(2)

(161)

Treasury stock, 38,187 and 28,641 shares as of June 30, 2023 and December 31, 2022, respectively; at cost

(54)

(35)

Accumulated deficit

 

(177,435)

 

(150,266)

Total stockholders’ equity

 

72,181

 

49,032

Total liabilities and stockholders’ equity

$

110,370

$

94,161

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

    

Three months ended June 30, 

Six months ended June 30, 

    

2023

    

2022

2023

    

2022

Operating expenses:

    

  

    

  

  

    

  

Research and development

$

6,029

$

16,300

$

13,321

$

29,875

General and administrative

 

3,805

 

3,813

 

8,151

 

7,606

Restructuring charges

5,107

Total operating expenses

 

9,834

 

20,113

 

26,579

 

37,481

Loss from operations

 

(9,834)

 

(20,113)

 

(26,579)

 

(37,481)

Other income (expense), net

 

(271)

187

 

(580)

 

280

Loss before income taxes

(10,105)

(19,926)

(27,159)

(37,201)

Income tax expense

5

10

Net loss

$

(10,110)

$

(19,926)

$

(27,169)

$

(37,201)

Net loss per share, basic and diluted

$

(0.37)

$

(0.86)

$

(1.06)

$

(1.60)

Weighted average common shares outstanding, basic and diluted

 

27,575,596

 

23,258,759

 

25,608,008

 

23,237,600

Comprehensive loss:

Net loss

$

(10,110)

$

(19,926)

$

(27,169)

$

(37,201)

Other comprehensive gain (loss):

Unrealized gain (loss) on marketable securities

49

(71)

159

(275)

Total other comprehensive gain (loss)

49

(71)

159

(275)

Total comprehensive loss

$

(10,061)

$

(19,997)

$

(27,010)

$

(37,476)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Treasury

Comprehensive

Accumulated

Stockholders’

   

       Shares       

   

   Amount   

   

Capital

   

Stock

   

(Loss)

   

Deficit

   

Equity

Balance at December 31, 2022

 

23,312,529

$

2

$

199,492

$

(35)

$

(161)

$

(150,266)

$

49,032

Vesting of restricted common stock

 

3,946

 

 

1

 

 

 

 

1

Issuance of common stock, purchase warrants and pre-funded warrants for the purchase of common stock, net of underwriting discounts, commissions and offering costs

17,810,000

2

46,501

46,503

Issuance of common stock upon stock option exercises

1,239,899

1,466

1,466

Stock-based compensation

 

 

 

2,208

 

 

 

 

2,208

Vesting of restricted stock units, net of withholding

15,578

 

 

 

(19)

 

 

 

(19)

Unrealized gain on marketable securities

159

159

Net loss

 

 

 

 

 

 

(27,169)

 

(27,169)

Balance at June 30, 2023

 

42,381,952

$

4

$

249,668

$

(54)

$

(2)

$

(177,435)

$

72,181

Accumulated

Additional

Other

    

Total

Common Stock

Paid-in

Treasury

Comprehensive

Accumulated

Stockholders’

   

       Shares       

   

   Amount   

   

Capital

   

Stock

   

(Loss)

   

Deficit

   

Equity

Balance at December 31, 2021

 

23,205,915

$

2

$

195,881

$

$

$

(55,186)

$

140,697

Vesting of restricted common stock

7,890

 

4

4

Issuance of common stock upon stock option exercises

44,105

19

19

Stock-based compensation

 

 

 

1,464

 

 

 

 

1,464

Vesting of restricted stock units, net of withholding

31,154

(25)

(25)

Unrealized loss on marketable securities

(275)

(275)

Net loss

 

 

 

 

 

 

(37,201)

 

(37,201)

Balance at June 30, 2022

 

23,289,064

$

2

$

197,368

$

(25)

$

(275)

$

(92,387)

$

104,683

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

Accumulated

    

    

    

    

Additional

    

    

Other

    

    

    

Total

Common Stock

Paid-in

Treasury

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Stock

    

(Loss)

    

Deficit

    

Equity

Balance at March 31, 2023

 

23,786,337

$

2

$

201,185

$

(47)

$

(51)

$

(167,325)

$

33,764

Issuance of common stock, purchase warrants and pre-funded warrants for the purchase of common stock, net of underwriting discounts, commissions and offering costs

17,810,000

2

46,501

46,503

Issuance of common stock upon stock option exercises

777,826

1,238

1,238

Stock-based compensation

 

 

 

744

 

 

 

 

744

Vesting of restricted stock units, net of withholding

7,789

 

 

 

(7)

 

 

 

(7)

Unrealized gain on marketable securities

49

49

Net loss

 

 

 

 

 

 

(10,110)

 

(10,110)

Balance at June 30, 2023

 

42,381,952

$

4

$

249,668

$

(54)

$

(2)

$

(177,435)

$

72,181

Accumulated

    

    

    

    

Additional

    

    

Other

    

    

    

Total

Common Stock

Paid-in

Treasury

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Stock

    

(Loss)

    

Deficit

    

Equity

Balance at March 31, 2022

 

23,253,966

$

2

$

196,529

$

$

(204)

$

(72,461)

$

123,866

Vesting of restricted common stock

3,944

 

2

2

Stock-based compensation

 

 

 

837

 

 

 

 

837

Vesting of restricted stock units, net of withholding

31,154

(25)

(25)

Unrealized loss on marketable securities

(71)

(71)

Net loss

 

 

 

 

 

 

(19,926)

 

(19,926)

Balance at June 30, 2022

 

23,289,064

$

2

$

197,368

$

(25)

$

(275)

$

(92,387)

$

104,683

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six months ended June 30, 

    

2023

    

2022

Operating activities

    

  

    

  

Net loss

$

(27,169)

$

(37,201)

Reconciliation of net loss to net cash used in operating activities:

 

  

 

  

Stock-based compensation

 

2,208

 

1,464

Non-cash interest expense

337

Accretion of premium and interest on marketable securities

(175)

10

Depreciation expense

 

20

 

9

Changes in operating assets and liabilities:

 

  

 

Prepaid expenses and other assets

 

1,413

 

1,963

Accounts payable

 

(1,122)

 

(4,353)

Accrued expenses

 

(6,154)

 

14,657

Net cash used in operating activities

 

(30,642)

 

(23,451)

Investing activities

Purchase of marketable securities

(85,245)

Proceeds from sales and maturities of marketable securities

43,100

16,300

Net cash provided by (used in) investing activities

43,100

(68,945)

Financing activities

 

  

 

  

Proceeds from issuance of common stock, purchase warrants and pre-funded warrants for the purchase of common stock, net of underwriting discounts, commissions, and offering costs

46,503

Proceeds from issuance of common stock upon stock option exercises

1,466

19

Common stock repurchase

(19)

(25)

Net cash provided by (used in) financing activities

 

47,950

 

(6)

Increase (decrease) in cash and cash equivalents

 

60,408

 

(92,402)

Cash and cash equivalents, beginning of period

 

45,917

 

146,284

Cash and cash equivalents, end of period

$

106,325

$

53,882

Supplemental disclosure of cash flow information

Interest paid

$

1,392

$

Supplemental disclosure of non-cash financing activities

Offering costs in accounts payable and accrued expenses

$

390

$

Common stock repurchase in accrued expenses

$

$

25

The accompanying notes are an integral part of these condensed consolidated financial statements.

9

ELEVATION ONCOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share and per share data)

(unaudited)

1. Nature of Business

Elevation Oncology, Inc. (the “Company” or “Elevation”), which was formerly known as 14ner, Inc., was incorporated under the laws of the State of Delaware on April 29, 2019 (“Inception”). The Company is an innovative oncology company focused on the discovery and development of selective cancer therapies to treat patients across a range of solid tumors with significant unmet medical needs. The Company is rethinking drug development by seeking innovative, selective cancer therapies that can be matched to a patient’s unique tumor characteristics. The Company obtained exclusive worldwide rights outside Greater China (the People’s Republic of China, Hong Kong, Macau and Taiwan) to develop and commercialize EO-3021, a clinical stage antibody drug conjugate targeting Claudin 18.2, pursuant to a license agreement executed with CSPC Megalith Biopharmaceutical Co., Ltd., a subsidiary of CSPC Pharmaceutical Group Limited, during the year ended December 31, 2022 (see Note 11). During the quarter ended March 31, 2023, the Company announced that it paused further investment in the clinical development of seribantumab, an anti-HER3 monoclonal antibody for solid tumors driven by neuregulin-1, or NRG1 fusions, a type of genomic alteration and oncogenic driver in solid tumors. As a result, further enrollment in the Phase 2 CRESTONE study of seribantumab was paused. Long-term follow-up of all patients who have been treated with seribantumab to date remains ongoing. The Company intends to pursue further clinical development of seribantumab only in collaboration with a partner. The Company is exploring opportunities through new or existing partnerships and business development opportunities to expand its novel oncology pipeline.

Risks and uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of its product candidates will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

The Company continues to monitor the ongoing presence of COVID-19. The extent of the impact of COVID-19 on the Company’s operational and financial performance will continue to depend on certain developments, including the impact on the Company’s clinical trials, as well as on those of its licensors and partners, and the impact on the Company’s suppliers and manufacturers, all of which are uncertain and cannot be predicted. COVID-19 has not had a significant impact on the operations or financial results of the Company to date.

10

Liquidity

The Company has incurred recurring net losses since inception and has funded its operations to date through the proceeds from the sale of convertible preferred stock, proceeds from public offerings of common stock and warrants, and borrowings under loan agreements. The Company incurred net losses of $10.1 million and $19.9 million for the three months ended June 30, 2023 and 2022, respectively, and $27.2 million and $37.2 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, the Company had an accumulated deficit of $177.4 million and cash, cash equivalents, and marketable securities totaling $107.9 million. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance date of the condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

2. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

The condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiary, Elevation Oncology Securities Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of presentation of unaudited interim consolidated financial statements

The condensed consolidated interim financial statements have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. The December 31, 2022 condensed consolidated balance sheet was derived from the December 31, 2022 audited consolidated financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2023.

The accompanying condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”).

Significant accounting policies

Use of estimates

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company bases its estimates and assumptions on known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accruals for research and development expenses, the valuation of common stock and the assumptions used in the valuation of share-based compensation awards. Changes in estimates are recorded in the period in which they become known. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and, given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.

11

Deferred offering costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should a planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.

Deferred financing costs

The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the condensed consolidated statements of operations. Unamortized deferred financing costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.

Concentrations of credit risk and significant suppliers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company’s money market funds are invested in highly rated funds. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company has not experienced any losses on its deposit of cash and cash equivalents and does not believe that it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. These programs could be adversely affected by a significant interruption in the supply of such drug substance and drug products. During the three and six months ended June 30, 2023, the Company had two vendors that accounted for approximately 67% and 62% of its research and development expense, respectively. During the three and six months ended June 30, 2022, the Company had two vendors that accounted for approximately 75% and 64% of its research and development expense, respectively. As of June 30, 2023 and December 31, 2022, the Company had one and two vendors that accounted for approximately 90% and 87% of total accounts payable, respectively.

Fair value measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Non-observable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, prepaid expenses and other current assets and accounts payable, approximate fair value due to the short-term nature of these items.

12

Marketable securities, available for sale

All marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company may classify certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date.

Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity (deficit) until realized. Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net. The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for accretion of premiums and amortization of discounts to maturity. In accordance with the Company’s investment policy, management invests in money market funds, corporate bonds, commercial paper, asset-backed securities and government securities. The Company has not realized any losses on its marketable securities to date.

Comprehensive income (loss)

The Company’s only element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale marketable securities.

Patent costs

The legal and professional costs incurred by the Company to maintain its patent rights are expensed and included as part of general and administrative expenses. As of June 30, 2023 and 2022, the Company has determined that these expenses have not met the criteria to be capitalized. Intellectual property related expenses for the three months ended June 30, 2023 and 2022 were less than $0.1 million and $0.1 million, respectively. Intellectual property related expenses for the six months ended June 30, 2023 and 2022 were $0.1 million and $0.2 million, respectively.

3. Fair Value Measurements of Financial Assets

The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows:

As of June 30, 2023

Level 1

Level 2

Level 3

Total

(in thousands)

Cash and Cash Equivalents:

Money market funds

$

9,670

$

$

$

9,670

$

9,670

$

$

$

9,670

Marketable Securities

Corporate debt securities

$

$

1,598

$

$

1,598

Total

$

$

1,598

$

$

1,598

13

As of December 31, 2022

Level 1

Level 2

Level 3

Total

(in thousands)

Cash and Cash Equivalents:

Money market funds

$

3,298

$

$

$

3,298

$

3,298

$

$

$

3,298

Marketable Securities

Corporate debt securities

$

$

15,460

$

$

15,460

Commercial paper

14,999

14,999

U.S. Government debt securities

13,904

13,904

Total

$

$

44,363

$

$

44,363

There were no transfers into or out of Level 3 during the three and six months ended June 30, 2023 or 2022.

4. Marketable Securities

The following table summarizes the Company’s marketable securities as of June 30, 2023 and December 31, 2022.

As of June 30, 2023

    

Amortized

    

Unrealized 

    

Unrealized 

    

Fair 

Cost

gains

losses

value

(in thousands)

Marketable Securities:

Corporate debt securities

$

1,600

$

$

(2)

$

1,598

Total

$

1,600

$

$

(2)

$

1,598

As of December 31, 2022

    

Amortized

    

Unrealized 

    

Unrealized 

    

Fair 

Cost

gains

losses

value

(in thousands)

Marketable Securities:

Corporate debt securities

$

15,627

$

$

(167)

$

15,460

Commercial paper

14,999

14,999

U.S. Government debt securities

13,898

6

13,904

Total

$

44,524

$

6

$

(167)

$

44,363

14

5. Accrued Expenses

Accrued expenses consist of the following:

    

June 30, 

    

December 31, 

2023

2022

(in thousands)

Accrued preclinical and clinical trial costs

$

238

$

6,174

Accrued restructuring charges

37

Accrued compensation

 

1,916

 

2,498

Accrued consulting

 

27

 </